Alexander Fleming kept finding mold contamination that was killing his bacterial cultures. This observation eventually lead to the development of the antibiotic penicillin. Why would a fungus produce a compound that is selectively toxic to bacteria?

Fungi compete with bacteria for resources

Explanation:

Alexander Fleming discovered the Fungi called Penicillium notatum. He discovered that his culture was contaminated by a Fungi mold and the Bacteria in the culture were dying.

He figured out the mold as the cause and found it to be Penicillium. He also discovered the death was caused by the competition of fungi and bacteria for available resources and the fungi's interference with the cell wall (cell lysis) of the bacteria. Several years later after technological advancements and researches, the fungi was extracted and isolated and produced in large quantities as a potent antibiotic.